Mozambique holds rate on global risks, higher C/A deficit

   Mozambique’s central bank left its benchmark standing facility rate steady at 7.50 percent, noting the increased risks in the international financial markets and economy along with the persistent strengthening of the U.S. dollar and volatile prices of raw materials that resulted in an increase in the country’s current account deficit.
    The Bank of Mozambique, which has maintained its rates this year after cutting by 75 basis points in 2014, noted the favourable evolution of inflation that reflects increased production and supply of fruits and vegetables and a slowdown in the depreciation of the metical’s exchange rate.
    Mozambique’s current account deficit widened by US$152 million, or by $351 million excluding major projects, to $959.6 million, or $621.3 million excluding major projects, in the first quarter of 2015 compared with the first quarter of 2014.
     The exchange rate of the metical in the segment of the interbank market where commercial banks deal with clients was 39.96 to the U.S. dollar on the last day of June, for a monthly depreciation of 7.33 percent and an annual drop of 26.34 percent due to the strength of the U.S. dollar and the deterioration in the current account balance due to unfavorable raw materials prices.
    However, due to the central bank’s measures in the first week of July there was a slowdown in the metical’s depreciation, with its exchange rate at 38.5 to the dollar in the commercial market segment.
    Mozambique’s Net International Reserves (NIR) rose by US$146 million to $2.6 billion, according to provisional June data, $50 million above target, reflecting purchases by the central bank totaling $147 million and disbursement of external funds in favor of state projects worth $43 million.
    Mozambique’s inflation rate rose slightly to 1.36 percent in June from 1.29 percent in May.
    In the first quarter of this year, Mozambique’s Gross Domestic Product expanded by an annual rate of 5.9 percent, down from 7.9 percent seen in the fourth quarter of 2014.
 
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